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A long night for textile stocks

Apr 14, 2000

The last two years have seen the textile industry in the dumps. While raw cotton prices fluctuated, adversely affecting the yarn manufacturers, realisations were static for spinning mills. Even for a cellulosic fibre such as Viscose Filament Yarn (manufacturer: Indian Rayon) the realisation of the past five quarters have actually fallen from a level of Rs 210/kg to Rs 175/kg. The Directors report of Madura Coats, in its latest (Dec’99) annual report, mention “…selling prices for the traditional businesses (read fabrics) were at best flat. Cost increases can increasingly, be recovered only from productivity gains.”

For cotton yarn manufacturers such as Arvind Mills however, there seems to be some respite. The 'Shankar 6' variety of cotton which is used in the manufacture of denim (Arvind Mills is the largest manufacturer of denim in the country) has seen a 20% decline in prices from an average price of Rs 62/kg (in the middle of 1998) to Rs 50/kg at present. Since Arvind buys most of its raw cotton requirements between October–December, it is possible that the company would have got the benefit of lower cotton prices.

However, the company has transferred all its brands to a subsidiary company Arvind Garments and is likely to remain in the red for quite sometime in the future. Of the other textile companies, Indian Rayon has ventured into the branded apparel segment by buying up brands such as Van Heusen, Allen Solly etc. from Madura Coats to reduce dependence on commodity textiles. Raymond is going into top of the line shirting but still carries a baggage of steel and cement which it wants to hive off anyway.

All in all, a lot of pain still awaits the textile industry before it gets back to spinning a new yarn.

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